Fake U.S. Recovery

in #money10 years ago

Go on Yahoo finance, stock center, type in DJI (DOW JONES INDUSTRIAL) and click on it, then click on interactive chart, then click max to see the last 35 years. You will see the image for yourself! I couldn't believe it when I looked at it! (I added the arrows and comments to make it look more visual)

 This chart depicts the Dow Jones ndustrial average over the last 35 years which composes of the 30 largest corporations in the U.S.. The price of the DJI stock is in blue, to the right is its corresponding price for a share of stock. On the bottom where the red and green lines are located is the volume. This represents the amount of shares of stock being traded. Green represents more buyers than sellers, while red represents more sellers than buyers. Notice how price is reflective on volume. Increase in stock price stems from increase in volume of shares being traded, more people entering the market. Steady price stems from a steady volume of shares being traded. Notice since 2009 volume has decreased but the stock price has almost tripled. Less people are in the market, yet the price has gone up? This must partially be due to the Federal Reserve issuing Quantitative Easing 1, 2, 3. In conclusion, the Federal Reserve's decision to lower interest rates to zero percent has had some consequences, not so much in the short term, but in the long term, our Monetary Policy has been put at a large risk of financial collapse due to the increase in expenditures of debt issued to the public. This will place a major burden on the families of the next generation of workers in the U.S. economy.


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While I agree with your conclusion, that monetary policy involving Quantative Easing and public debt spriraling out of control are terrible for long term economics, your interpretation of the charts are flawed and you have falsely identified some cause/effect relationships.

For volume, the red lines don't mean "more buyers than sellers", it means that bar closed lower than it opened (for whatever reason), and green lines mean that bar closed higher than it opened (also for any of a variety of reasons). Also, increased volume does not imply increased in price. For example, price can often go down on higher volume if there's bad news, and a price can go up on low volume if the few buyers are willing to pay more.

Increases in price are often correlated with increases in volume as more people enter the market, but this is only a correlation and does not imply a causal relationship.

I don't know this for sure, but I suspect the decreased volume since 2009 on this chart is mostly due to the increased regulations in the financial industry, and the trend to diversify away from the 30 DJIA stocks, as well as the marked decrease in the actual value of each dollar (due to out-of-control inflation that is not considered inflation because it's "corrected" for).

Real economy is dying we are living at the calm before of storm, chinese exports are going down, baltic dry index down, stocks markets are not collapsing only for the monetary tricks of central banks but it is only a way of buy some time. Structural problems are exactly the same than before, simply look debt levels

When you can print money out of thin air, then you can buy up ... everything!

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